Feds take action on Metro rail lines to protect taxpayers

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by Mark Greenblatt / 11 News Defenders

khou.com

Posted on April 22, 2010 at 12:42 AM

Updated Thursday, Apr 22 at 9:39 AM

HOUSTON -- The Federal Transit Administration said it "won’t approve" federal funding right now on two light rail extensions proposed by Metro; until it can become confident the transit authority can afford to finish the jobs while still maintaining current service.

"In the interest of protecting the taxpayer, the FTA will not approve full funding grant agreements for the north and southeast corridor light rail projects until we are confident that Houston Metro can afford to build and operate these two new lines while maintaining its existing system," said Paul Griffo of the FTA.

The statement came in response to continued questions from KHOU-TV in Houston about irregularities the station discovered in financial forecasts that Metro provided to the FTA as part of an application for $900 million in federal tax money. Metro intends to use the money to help it begin work on two new light rail extensions in Houston.

Last week, KHOU reported Metro gave federal regulators an outdated pre-stock market crash financial forecast, which made it appear as if the transit authority would have $2.4 billion more money coming in over the next 15 years than the most current forecasts show.

"The feds ought to have been given the updated numbers," said University of Houston economist Dr. Barton Smith last week. Smith is the author of those financial forecasts for Metro.

He says the difference between his 2008 pre-crash predictions, which Metro used, and his 2009 post crash figures is demonstrable.

 "We were just going along it was growth growth growth," Smith said in an interview that first aired last week, referring to his old projections. "All of a sudden it was like the rug was pulled out from under the sales-tax base."

Both the FTA and Metro each confirmed the federal government was given the outdated forecast for sales-tax revenue, with no update provided, until KHOU told the agencies it had discovered the discrepancies.

However, one day after KHOU’s initial report, Metro went on the defensive posting a videotaped statement at the top of its Web page.

"Much of what was reported in the story was inaccurate and misleading," said Metro Vice President of Communications George Smalley in the videotaped element online.

"The allegation is completely and utterly false," he said.

Smalley went on to claim in the videotape statement that Metro’s sales tax revenue forecasts could be trusted because, he said, "The most recent sales tax projections were developed jointly with the FTA in July, 2009."

However, the FTA said Metro’s statement was inaccurate.

"The FTA does not develop sales-tax projections. Rather, it reviews and analyzes the projections submitted by project sponsors," said Paul Griffo of the FTA.

The federal agency went on to criticize Metro’s previous sales tax revenue forecasts.

"The FTA first signaled its concern with Houston’s aggressive tax revenue assumptions and insisted on revisions back in May of 2009. FTA is now analyzing even more updated revenue projections submitted by Houston," said Griffo.

The FTA confirmed this week those updated revenue projections were obtained last week after KHOU began asking questions. It said the FTA has also obtained other new information it is now analyzing, but would not disclose the nature of those other new items.

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